Gordon Bennie, partner and Mena Financial Services leader at EY, said: “We believe that the future success of Islamic banks will be measured less by the growth of assets and more by the quality of this growth.”

“Impact made through responsible banking, inclusive growth and alignment with the broader halal asset class will be the defining features. Also, trade patterns are shifting decisively in favor of rapid growth markets and QISMUT will be the major beneficiaries. Banks with strong connectivity across key markets and sectors are set to gain.”

Ashar Nazim, partner, Global Islamic Banking Center at EY, said: “Bahrain and the six rapid-growth markets are systemically important to the future globalization of the Islamic banking industry. We expect Islamic banking to grow at a CAGR of 19.7 per cent across QISMUT to reach $1.6 trillion by 2018 compared to $567 billion in 2012.”

“Islamic finance markets are far from being homogenous as each market is at a different stage of maturity and profitability varies significantly compared to conventional banking. For 2012, the average ROE of the 20 leading Islamic banks was 12.6 per cent compared to 15 per cent for its conventional peers,” added Ashar.

The biggest challenges for Islamic banks are how to become a mainstream form of banking in their home markets, diversification to build regional brands, and taking a more socially responsible approach to differentiate themselves from conventional banks. The growth of the industry is expected to remain moderate going into 2014, as several leading Islamic banks contemplate large scale operational transformation.

“Driving such a broad change program - combining cost improvement with revenue growth - requires exceptional leadership capabilities and significant management capacity. Moving forward, customer and technology will be among the top transformation themes for the global Islamic banking industry,” concluded Ashar.